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Diversification Benefits of REIT Preferred and Common Stock: New Evidence from a Utility Based Framework

dc.contributor.authorBoudry, Walter I.
dc.contributor.authordeRoos, Jan A.
dc.contributor.authorUkhov, Andrey D.
dc.date.accessioned2020-09-11T13:49:26Z
dc.date.available2020-09-11T13:49:26Z
dc.date.issued2014-09-10
dc.description.abstractWe study the diversification benefits of REIT preferred and common stock using a utility based framework in which investors segment based on risk aversion. Taking the view of a long run investor, we conduct our analysis using data from 1992 to 2012. We examine optimal mean-variance portfolios of investors with different levels of risk aversion given access to different classes of assets and establish two main results. First, REIT preferred and common stock provides significant diversification benefits to investors. REIT common stock helps low risk aversion investors attain portfolios with higher returns, while REIT preferred stock helps high risk aversion investors by providing a venue for risk reduction. Both asset classes receive material allocations over plausible levels of risk aversion. Second, while REIT preferred stock appears to behave somewhat like a hybrid debt/equity asset, its risk/return profile appears to not easily be replicated by those asset classes. When given the opportunity, investors will reduce allocations to REIT common stock and investment grade bonds and invest in REIT preferred stock.
dc.description.legacydownloadsBoudry12_Diversification_Benefits_of_REIT_Preferred_and_Common_Stock_New_Evidence_from_a_Utility_Based_Framework.pdf: 1335 downloads, before Aug. 1, 2020.
dc.identifier.other5699852
dc.identifier.other7351170
dc.identifier.urihttps://hdl.handle.net/1813/71366
dc.language.isoen_US
dc.rightsRequired Publisher Statement: Copyright held by the authors.
dc.subjectREIT preferred and common stock
dc.subjectasset management
dc.subjectdebt
dc.subjectrisk aversion
dc.titleDiversification Benefits of REIT Preferred and Common Stock: New Evidence from a Utility Based Framework
dc.typepreprint
local.authorAffiliationBoudry, Walter I.: wb242@cornell.edu Cornell University
local.authorAffiliationdeRoos, Jan A.: jad10@cornell.edu Cornell University
local.authorAffiliationUkhov, Andrey D.: au53@cornell.edu Cornell University

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